GREENHOUSE GAS POLICY IMPLICATIONS FOR

KENTUCKY’S ENERGY FUTURE

Presented by John S. Lyons

Kentucky Energy and Environment CabinetMarch 13, 2014

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Section 111(d) – Existing Sources• Preceded by issuance of an NSPS under 111(b) for new sources

• Regulatory Mechanism – 40 CFR 60 Subpart B• Why Subpart B? – 60.22(d)(1) – Welfare pollutant

• EPA issues guideline document• States submit “SIP” like plan• If state fails to submit or EPA disapproves, then EPA will issue a federal plan

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Burning Questions• What are “meaningful carbon reductions”?• Will EPA set a reduction target expressed as an emission rate by unit and fuel type or something more broad?

• Does the definition of stationary source allow a “beyond the fence line” approach?

• What is Best System of Emission Reduction?• How will cost of reduction be calculated?• What is adequately demonstrated?• What is remaining useful life?

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Kentucky’s 2012 Electricity Generation

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92%

3%2% 3% 1%

CoalNatural GasPetroHydroOther

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Rank State

Electricity IntensitykWh of

Electricity Consumption per

Real GDP

Rank StateElectricity Intensity

kWh of Electricity Consumption per Real GDP

1 Kentucky 0.541 27 Nevada 0.2772 Mississippi 0.503 28 Texas 0.2743 Alabama 0.496 29 Michigan 0.2744 West Virginia 0.468 30 Washington 0.2605 South Carolina 0.467 31 Virginia 0.2596 Wyoming 0.465 32 Pennsylvania 0.2537 Arkansas 0.449 33 United States 0.2498 Idaho 0.424 34 Oregon 0.2479 Oklahoma 0.386 35 Minnesota 0.240

10 Indiana 0.368 36 Utah 0.24011 Tennessee 0.368 37 Maine 0.22712 Louisiana 0.366 38 Illinois 0.21613 Montana 0.359 39 Vermont 0.21214 Missouri 0.336 40 Colorado 0.20715 North Dakota 0.334 41 Maryland 0.20516 Georgia 0.320 42 Delaware 0.18517 Nebraska 0.318 43 New Hampshire 0.17718 Iowa 0.316 44 Rhode Island 0.15919 Ohio 0.314 45 New Jersey 0.15720 New Mexico 0.304 46 Massachusetts 0.14221 Kansas 0.304 47 Hawaii 0.14022 Florida 0.296 48 California 0.13623 North Carolina 0.296 49 Connecticut 0.13524 Arizona 0.296 50 Alaska 0.13025 South Dakota 0.294 51 New York 0.12426 Wisconsin 0.277 52 District of Columbia 0.108

Electricity Intensity by State, 2012

Framework Objectives• Utilize mass emission reductions as the primary

mechanism for addressing short term (15 years) GHG reductions.

• Ensure that the fossil fueled electricity generating sector has the time and resources necessary to transition to a cleaner fleet as the market dictates.

• Provide that the fossil fueled electricity generating sector has the flexibility to choose the least cost method of achieving reductions.

• Encourage diversity for Kentucky’s electricity generation fleet.

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0.0

20.0

40.0

60.0

80.0

100.0

120.0

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

Mill

ion

Tons

of C

O2

Year

KY CO2 Trends and Anticipated Reductions

CO2 Emissions

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Kentucky’s Current and Future Estimates of Fossil Fleet CO2 Mass Emission Reductions

 

  2005 2012 Scenario #1* 2020

Scenario #2* 2025

  

Scenario #3**2030

Million Tons of CO2

Emission data from CAMD Acid Rain Database 

100 93 80 72

   

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% Reduction from 2005   7% 20% 27%

 38%

EEC 111 (d) Whitepaper• Issued on October 22, 2013• Focuses on Kentucky’s electricity intensive manufacturing sector

• Discusses a potential framework with various compliance options

• Compares two divergent approaches of an emissions reduction program

• Promotes maximum flexibility afforded under 111(d)

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Framework Objectives• Utilize a mass emissions reduction vs. rate-based standard

• Ensure EGUs have time to transition to a cleaner fleet

• Provide that the EGU sector has flexibility to choose a least-cost option

• Encourage diversity in Kentucky’s fleet

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Possible Compliance Options• Demand-side Management (DSM)• Supply-side Efficiency• Transmission Upgrades• Renewable Energy• CCS Technology• Fuel Switching• Offsets• Market-based Programs

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EEC Paper on Energy Outlook Under Carbon Constraints

• Issued on December 16, 2013• Companion paper to the 111(d) white paper • Study initiated in early June 2013• Information obtained from all Kentucky Investor Owned Utilities

• Employs a custom-built dispatch model• Four policy options (BAU, Flexible Portfolio, Balanced Portfolio, Coal Portfolio) run with high and low NG prices

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Modeling Reference Case13

Our Aging Coal-fired Generation14

Kentucky’s 2020 Projected Electricity Generation (w/o any GHG regulations)

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78%

19%

3% 1%

CoalNatural GasHydroBiomass

ConclusionsDiscussions on 111(d) have evolved since the white

paper was issued.EEC has not conceded any legal positions on the extent

of EPA’s authority under 111(d).Kentucky’s energy profile will change considerably even

without GHG regulations.EEC’s national involvement in the stakeholder process

is crucial to protecting Kentucky’s manufacturing jobs. Environmental regulations and market forces are

forcing diversity to Kentucky’s energy profile.

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Thank You

John S. LyonsAssistant Secretary for Climate Policy

Kentucky Energy and Environment Cabinetjohn.lyons@ky.gov

502-564-3350www.eec.ky.gov

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